DECA Quick-Serve Restaurant Management Practice Exam 2025 – Your All-in-One Guide to Exam Success!

The arrangement described in the question, where a coffee shop receives 60 days to pay for cups and mugs without penalty, is known as trade credit. Trade credit is a common practice in business-to-business transactions, allowing one business to purchase goods and services from another with the agreement that payment will be made at a later date. This arrangement is beneficial for businesses like coffee shops as it helps manage cash flow by delaying the outflow of cash, enabling them to generate revenue from sales before having to settle the payment.

Understanding trade credit is important for managing finances, as it can provide flexibility in purchasing and stock management. It allows businesses to maintain their inventory without immediately impacting their cash reserves, giving them time to sell products before making payments to suppliers. This is a fundamental aspect of relationships between buyers and suppliers in many industries, especially in retail and food service sectors.